How is it different from how banks work?

When you deposit money in a bank, the bank holds it on your behalf and controls access to your account. In most cases, this works fine. But it means you depend on the bank to give you access to your own money, and that access can be restricted.

With self-custody, there is no institution between you and your money. Your funds are on the blockchain, and only you hold the private key that allows access to them.

Does self-custody mean I manage everything myself?

Not necessarily. In the early days of blockchain, self-custody meant writing down a long phrase of random words on a piece of paper and keeping it somewhere safe. If you lost that piece of paper, you lost your money. That approach works for technical users, but it is not practical for most people.

Since then, the industry has developed simpler and safer ways to give people self-custody without that burden. Technologies like MPC (Multi-Party Computation) wallets split the responsibility of securing your private key across multiple parties, so that no single party has full access. This means you can have the benefits of self-custody without needing to manage a private key yourself.

What are the benefits of self-custody?

If the service you use shuts down, your funds are still on the blockchain and accessible from any compatible app. You do not need to trust any single company to behave responsibly with your money, because no single company has control over it.

What are the risks?

Self-custody means responsibility. With older approaches, losing your private key meant losing your funds permanently. Modern solutions have built in recovery options and security layers that make this much less likely, but it is still important to understand how your funds are secured with any service you use.